PAY BACK: The Wave 5 contractors, with Gary and Jo Fenner at front - were compenstated by the NSW Government fo unpaid work for the Pacific Highway.Adam Hourigan

Business

Out of pocket subcontractors inspired by Pacific Highway win

by Aisling Brennan

6th Feb 2019 12:00 AM
| Updated:
6:57 AM
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THE NSW Government's bailout of Pacific Highway subcontractors who were left scrambling after the collapse of Queensland construction group Oswalt Bros, could be the inspiration for similar companies north of the border caught in the same position.

Queensland subcontractors left unpaid millions of dollars are pleading with the State Government to compensate those caught out by the collapse of builder JM Kelly Project Builders in 2016.

Queensland subbie representatives say their Government needs to replicate the decision by the NSW Government last July to repay subcontractors the $7.5 million owing to them from the collapse of Oswalt Bros during the upgrade of the Pacific Highway.

A group of 23 North Coast subcontractors, who went by the name of Wave 5, spent nearly a year battling with the NSW Government win an ex gratia payment to cover their losses .

Following the 2016 collapse of JM Kelly during major Queensland infrastructure projects, many subcontractors were left out of pocket and are now looking to the Queensland Government to reiumburse them for their troubles.

The Queensland Government was both the client and the provider of Pre-Qualified Contractor status to two JM Kelly Group companies.

It also was ultimately responsible for the industry regulator, the Queensland Building and Construction Commission which licensed the companies.

Liquidator FTI Consulting found that at the time of JM Kelly Project Builders' 2016 collapse it may have been trading insolvent since June 2013, while JM Kelly Builders, which went into voluntary administration in October last year and then liquidation in November, was found by Price Waterhouse Coopers to have been insolvent since January 2017.

The audited financial position provided to the QBCC on April 22, 2016, by JM Kelly Project Builders' director Geoff Murphy was in stark contrast to that found by those described by FTI Consulting just eight weeks later.

Yet the departments of Housing and Public Works, Education and Health had all agreed to transfer contracts they had with Project Builders to JM Kelly Builders which operated from the same Rockhampton address and had, as its sole director, John Murphy, who had been general manager of JM Kelly Project Builders.

And despite complaints, including from one of its own contract supervisors, that John Murphy had signed false statutory declarations that all subcontract and supply invoices had been paid as they fell due, the Department of Housing and Public Works found there was insufficient evidence for it to refer the allegations to police.

Subbies United spokesman John Goddard said subcontractors had been left unpaid for work done on public housing projects after the collapse of Batir Constructions and for a range of infrastructure projects from schools to hospitals for JM Kelly Project Builders and JM Kelly Builders.

"Yes, they are responsible," Mr Goddard said of the Government.

"Its pre-qualification process is obviously extremely flawed."

Mr Goddard questioned how JMK Kelly Builders was able to retain its Pre-Qualified Contractor status after the collapse of JM Kelly Project Builders which was from the same group of companies operating from the same Rockhampton address and with largely the same personnel.

Subcontractors Alliance head Les Williams said the Government had been complicit in allowing the contracts to be transferred along with subcontractor retention money.

"It is not a question of the Government paying twice," he said.

"Should it have paid the builder in the first place? Its negligence has exposed subcontractors and caused them loss. It can't expect small business to bear the cost of its negligence or complicity.

"What it's done has impacted the bottom of the contractual chain, who have paid the bills."

In the case of JM Kelly Project Builders and JM Kelly Builders, government departments that engaged the companies were required to keep the Queensland Pre-Qualified Contractor Registrar informed of any signs that might indicate possible contractor failure or financial or managerial stress.

Mr Williams said subcontractors, through the lines of credit they had with their suppliers and the overdrafts they used to pay their workers, had funded many of the infrastructure projects for which JM Kelly Project Builders and JM Kelly Builders had been paid by the Government.